Air Products (NYSE:APD) today reported net income of $288 million and diluted earnings per share (EPS) of $1.36, on a continuing operations basis, for its fiscal third quarter ended June 30, 2013, down five* percent and four* percent respectively versus prior year.

The discussion of third quarter results and guidance in this release is based on non-GAAP continuing operations. A reconciliation to GAAP results can be found on pages four and five of this release.*

Third quarter revenues of $2,547 million increased nine percent versus prior year, with underlying sales down two percent due to the previously announced decision to exit the Polyurethane Intermediates (PUI) business. Acquisitions contributed six percent and higher energy cost pass-through increased sales five percent. Operating income of $383 million decreased three percent versus prior year. Operating margin of 15 percent was down 200 basis points versus prior year, primarily on higher pension costs, higher energy pass-through, acquisitions and under-recovery of higher power costs in Merchant Gases.

Sequential sales increased three percent, primarily due to seasonally stronger volumes in Merchant Gases and Performance Materials. Operating income declined two percent sequentially on higher Merchant costs and pension costs.

Commenting on the third quarter, John McGlade, chairman, president and chief executive officer, said, “Productivity and solid execution offset continued economic weakness, enabling us to deliver earnings within guidance. We remain focused on delivering on our commitments and executing on our $3 billion backlog -- and we expect these projects to be immediately accretive to earnings and cash flow as they come online. As stated previously, we are actively assessing additional actions that we can take that would result in increased value to our shareholders. While our review continues, we have already identified further actions we expect to take to improve margins and returns.”

Merchant Gases sales of $1,033 million increased 18 percent versus the prior year on stronger volumes and the Indura acquisition. Underlying sales increased two percent, primarily in the U.S. and Canada. Operating income of $165 million was flat versus prior year, with Indura profits and the higher volumes offset by higher pension costs and under-recovery of higher power costs. Sequentially, sales increased three percent as stronger volumes more than offset the effect of unfavorable currency. Operating income was down two percent sequentially, primarily on higher costs.

Tonnage Gases sales of $846 million increased ten percent versus the prior year on higher energy pass-through, partially offset by lower PUI volumes. Operating income of $120 million decreased 11 percent versus prior year and was down two percent, excluding PUI, mainly due to planned maintenance costs due to scheduled customer outages. Sequential sales increased five percent due to higher energy pass-through. Sequential operating income was flat, excluding PUI, with bonus reliability payment timing offset by lower overhead costs.

Equipment and Energy sales of $104 million increased nine percent versus prior year, primarily due to higher LNG project activity. Operating income of $16 million was up 63 percent versus prior year on the higher LNG project activity and lower development spending. Sequentially, sales decreased 16 percent and operating income declined 22 percent due to lower project activity. The sales backlog of $327 million is unchanged versus prior quarter.

Air Products expects fourth quarter adjusted EPS from continuing operations to be between $1.44 and $1.50 per share. The company’s adjusted guidance for continuing operations for fiscal 2013 is a range of $5.47 to $5.53 per share.

Access the Q3 earnings teleconference scheduled for 10:00 a.m. Eastern Time on July 23 by calling 719-325-2332 and entering pass code 5859980, or access event details on our website.

About Air Products
Air Products (NYSE:APD) provides atmospheric, process and specialty gases; performance materials; equipment; and technology. For over 70 years, the company has enabled customers to become more productive, energy efficient and sustainable. More than 20,000 employees in over 50 countries supply innovative solutions to the energy, environment and emerging markets. These include semiconductor materials, refinery hydrogen, coal gasification, natural gas liquefaction, and advanced coatings and adhesives. In fiscal 2012, Air Products had sales approaching $10 billion. For more information, visit www.airproducts.com.

Note: This release contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings guidance and business outlook. These forward-looking statements are based on management's reasonable expectations and assumptions as of the date of this release. Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors not anticipated by management, including, without limitation, further deterioration in global or regional economic and business conditions; weakening demand for the Company’s products and services; future financial and operating performance of major customers; unanticipated contract terminations or customer cancellations or postponement of projects and sales; the success of commercial negotiations; asset impairments or losses due to a decline in profitability of or demand for certain of the Company’s products or businesses, or specific product or customer events; the impact of competitive products and pricing; interruption in ordinary sources of supply of raw materials; the ability to recover unanticipated increased energy and raw material costs from customers; costs and outcomes of litigation or regulatory investigations; the success of productivity programs; the timing, impact, and other uncertainties of future acquisitions or divestitures; significant fluctuations in interest rates and foreign currencies from that currently anticipated; the impact of changes in environmental, tax or other legislation and regulations in jurisdictions in which the Company and its affiliates operate; the impact on the effective tax rate of changes in the mix of earnings among our U.S. and international operations; and other risk factors described in the Company's Form 10K for its fiscal year ended September 30, 2012. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this document to reflect any change in the Company's assumptions, beliefs or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.

* The presentation of non-GAAP measures is intended to enhance the usefulness of financial information by providing measures which our management uses internally to evaluate our baseline performance on a comparable basis. Presented below are reconciliations of the reported GAAP results to the non-GAAP measures.

Reconciliation Non-GAAP Measure
(Unaudited)

Q3
Continuing Operations

Operating
Income

Operating
Margin (a)

Income

Diluted
EPS

2013 GAAP

$383.1

15.0%

$287.8

$1.36

2012 GAAP

482.8

20.6%

357.2

1.66

Change GAAP

$(99.7)

(560bp)

$(69.4)

$(.30)

% Change GAAP

(21)%

(19)%

(18)%

2013 GAAP

$383.1

15.0%

$287.8

$1.36

2013 Non-GAAP Measure

$383.1

15.0%

$287.8

$1.36

2012 GAAP

$482.8

20.6%

$357.2

$1.66

Gain on previously held equity interest (tax impact $31.3)

(85.9)

(3.6)%

(54.6)

(.25)

2012 Non-GAAP Measure

$396.9

17.0%

$302.6

$1.41

Change Non-GAAP Measure

$(13.8)

(200bp)

$(14.8)

$(.05)

% Change Non-GAAP Measure

(3)%

(5)%

(4)%

(a) Operating margin is calculated by dividing operating income by sales.

Electronics and Performance Materials

Q3

Operating Income

2013 GAAP

$86.8

2012 GAAP

176.7

Change GAAP

$(89.9)

% Change GAAP

(51)%

2013 GAAP

$86.8

2013 Non-GAAP Measure

$86.8

2012 GAAP

$176.7

Gain on previously held equity interest

(85.9)

2012 Non-GAAP Measure

$90.8

Change Non-GAAP Measure

$(4.0)

% Change Non-GAAP Measure

(4)%

Capital Expenditures

We utilize a non-GAAP measure in the computation of capital expenditures and include spending associated with facilities accounted for as capital leases and purchases of noncontrolling interests. Certain contracts associated with facilities that are built to provide product to a specific customer are required to be accounted for as leases and such spending is reflected as a use of cash within cash provided by operating activities, if the arrangement qualifies as a capital lease. Additionally, the purchase of noncontrolling interests in a subsidiary is accounted for as an equity transaction and will be reflected as a financing activity in the statement of cash flows.

The presentation of this non-GAAP measure is intended to enhance the usefulness of information by providing a measure which our management uses internally to evaluate and manage our expenditures.

Below is a reconciliation of capital expenditures on a GAAP basis to a non-GAAP measure.

Air Products (NYSE:APD) today reported net income of $288 million and diluted earnings per share (EPS) of $1.36, on a continuing operations basis, for its fiscal third quarter ended June 30, 2013, down five* percent and four* percent respectively versus prior year.

The discussion of third quarter results and guidance in this release is based on non-GAAP continuing operations. A reconciliation to GAAP results can be found on pages four and five of this release.*

Third quarter revenues of $2,547 million increased nine percent versus prior year, with underlying sales down two percent due to the previously announced decision to exit the Polyurethane Intermediates (PUI) business. Acquisitions contributed six percent and higher energy cost pass-through increased sales five percent. Operating income of $383 million decreased three percent versus prior year. Operating margin of 15 percent was down 200 basis points versus prior year, primarily on higher pension costs, higher energy pass-through, acquisitions and under-recovery of higher power costs in Merchant Gases.

Sequential sales increased three percent, primarily due to seasonally stronger volumes in Merchant Gases and Performance Materials. Operating income declined two percent sequentially on higher Merchant costs and pension costs.

Commenting on the third quarter, John McGlade, chairman, president and chief executive officer, said, “Productivity and solid execution offset continued economic weakness, enabling us to deliver earnings within guidance. We remain focused on delivering on our commitments and executing on our $3 billion backlog -- and we expect these projects to be immediately accretive to earnings and cash flow as they come online. As stated previously, we are actively assessing additional actions that we can take that would result in increased value to our shareholders. While our review continues, we have already identified further actions we expect to take to improve margins and returns.”

Merchant Gases sales of $1,033 million increased 18 percent versus the prior year on stronger volumes and the Indura acquisition. Underlying sales increased two percent, primarily in the U.S. and Canada. Operating income of $165 million was flat versus prior year, with Indura profits and the higher volumes offset by higher pension costs and under-recovery of higher power costs. Sequentially, sales increased three percent as stronger volumes more than offset the effect of unfavorable currency. Operating income was down two percent sequentially, primarily on higher costs.

Tonnage Gases sales of $846 million increased ten percent versus the prior year on higher energy pass-through, partially offset by lower PUI volumes. Operating income of $120 million decreased 11 percent versus prior year and was down two percent, excluding PUI, mainly due to planned maintenance costs due to scheduled customer outages. Sequential sales increased five percent due to higher energy pass-through. Sequential operating income was flat, excluding PUI, with bonus reliability payment timing offset by lower overhead costs.

Equipment and Energy sales of $104 million increased nine percent versus prior year, primarily due to higher LNG project activity. Operating income of $16 million was up 63 percent versus prior year on the higher LNG project activity and lower development spending. Sequentially, sales decreased 16 percent and operating income declined 22 percent due to lower project activity. The sales backlog of $327 million is unchanged versus prior quarter.

Air Products expects fourth quarter adjusted EPS from continuing operations to be between $1.44 and $1.50 per share. The company’s adjusted guidance for continuing operations for fiscal 2013 is a range of $5.47 to $5.53 per share.

Access the Q3 earnings teleconference scheduled for 10:00 a.m. Eastern Time on July 23 by calling 719-325-2332 and entering pass code 5859980, or access event details on our website.

About Air Products
Air Products (NYSE:APD) provides atmospheric, process and specialty gases; performance materials; equipment; and technology. For over 70 years, the company has enabled customers to become more productive, energy efficient and sustainable. More than 20,000 employees in over 50 countries supply innovative solutions to the energy, environment and emerging markets. These include semiconductor materials, refinery hydrogen, coal gasification, natural gas liquefaction, and advanced coatings and adhesives. In fiscal 2012, Air Products had sales approaching $10 billion. For more information, visit www.airproducts.com.

Note: This release contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings guidance and business outlook. These forward-looking statements are based on management's reasonable expectations and assumptions as of the date of this release. Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors not anticipated by management, including, without limitation, further deterioration in global or regional economic and business conditions; weakening demand for the Company’s products and services; future financial and operating performance of major customers; unanticipated contract terminations or customer cancellations or postponement of projects and sales; the success of commercial negotiations; asset impairments or losses due to a decline in profitability of or demand for certain of the Company’s products or businesses, or specific product or customer events; the impact of competitive products and pricing; interruption in ordinary sources of supply of raw materials; the ability to recover unanticipated increased energy and raw material costs from customers; costs and outcomes of litigation or regulatory investigations; the success of productivity programs; the timing, impact, and other uncertainties of future acquisitions or divestitures; significant fluctuations in interest rates and foreign currencies from that currently anticipated; the impact of changes in environmental, tax or other legislation and regulations in jurisdictions in which the Company and its affiliates operate; the impact on the effective tax rate of changes in the mix of earnings among our U.S. and international operations; and other risk factors described in the Company's Form 10K for its fiscal year ended September 30, 2012. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this document to reflect any change in the Company's assumptions, beliefs or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.

* The presentation of non-GAAP measures is intended to enhance the usefulness of financial information by providing measures which our management uses internally to evaluate our baseline performance on a comparable basis. Presented below are reconciliations of the reported GAAP results to the non-GAAP measures.

Reconciliation Non-GAAP Measure
(Unaudited)

Q3
Continuing Operations

Operating
Income

Operating
Margin (a)

Income

Diluted
EPS

2013 GAAP

$383.1

15.0%

$287.8

$1.36

2012 GAAP

482.8

20.6%

357.2

1.66

Change GAAP

$(99.7)

(560bp)

$(69.4)

$(.30)

% Change GAAP

(21)%

(19)%

(18)%

2013 GAAP

$383.1

15.0%

$287.8

$1.36

2013 Non-GAAP Measure

$383.1

15.0%

$287.8

$1.36

2012 GAAP

$482.8

20.6%

$357.2

$1.66

Gain on previously held equity interest (tax impact $31.3)

(85.9)

(3.6)%

(54.6)

(.25)

2012 Non-GAAP Measure

$396.9

17.0%

$302.6

$1.41

Change Non-GAAP Measure

$(13.8)

(200bp)

$(14.8)

$(.05)

% Change Non-GAAP Measure

(3)%

(5)%

(4)%

(a) Operating margin is calculated by dividing operating income by sales.

Electronics and Performance Materials

Q3

Operating Income

2013 GAAP

$86.8

2012 GAAP

176.7

Change GAAP

$(89.9)

% Change GAAP

(51)%

2013 GAAP

$86.8

2013 Non-GAAP Measure

$86.8

2012 GAAP

$176.7

Gain on previously held equity interest

(85.9)

2012 Non-GAAP Measure

$90.8

Change Non-GAAP Measure

$(4.0)

% Change Non-GAAP Measure

(4)%

Capital Expenditures

We utilize a non-GAAP measure in the computation of capital expenditures and include spending associated with facilities accounted for as capital leases and purchases of noncontrolling interests. Certain contracts associated with facilities that are built to provide product to a specific customer are required to be accounted for as leases and such spending is reflected as a use of cash within cash provided by operating activities, if the arrangement qualifies as a capital lease. Additionally, the purchase of noncontrolling interests in a subsidiary is accounted for as an equity transaction and will be reflected as a financing activity in the statement of cash flows.

The presentation of this non-GAAP measure is intended to enhance the usefulness of information by providing a measure which our management uses internally to evaluate and manage our expenditures.

Below is a reconciliation of capital expenditures on a GAAP basis to a non-GAAP measure.

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